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VW tightens its belt to finance mega-investments in EV

A Volkswagen T-Roc (L) and a Volkswagen T-Cross are presented at the storage facility auto tower of German car maker, Volkswagen, in Wolfsburg. VW plans to launch 30 new SUV models in the coming years, among which several electric /AFP

On Thursday Volkswagen announced it is to cut production costs further to 3 billion euro to finance the mega-investments in electric vehicles. The German car maker, still the world’s largest, wants to become the number one in electric. Margins have to go up to 6% and production to improve by 30%, and that’s likely to cost jobs.

The Volkswagen Group wants to sell one million electric cars by 2025 and plans to launch 20 new EV models. With its core brand, Volkswagen, it hopes to screw up its profit margin from 4 to 6% by 2022, two years earlier than communicated to analysts before.

30 new SUV models

One way to do that is by launching 30 new SUV models, the most popular car type today in the market and by cutting costs. VW announced enormous retrenchments on production costs.

It aims to improve the productivity of its factories by 30% by standardizing production processes and realizing savings in raw materials. It also want to cut in the bureaucracy. The latter will have consequences on employment and direction and unions are talking about the number of jobs that will have to be cut and how to avoid forced resignations.

‘Not enough yet’

Ralf Brandstätter, COO of Volkswagen, warned that the company shouldn’t ‘weaken’ in the transformation and its austerity policy. “What we have achieved so far is not enough yet”, he told the press. This year the counter is set to 2,2 billion euro, by the end of 2020 this has to be 3 billion euro.

The Volkswagen Group (with the brands VW, Audi, Porsche, Skoda, Lamborghini, Bentley and Scania) is going to invest 44 billion euro in the next five years in new technologies, new drivetrains and autonomous driving. For the core brand VW alone this will be 11 billion euro, of which 9 billion will be in electric vehicles.

MEB platform

With its purely electrical MEB platform (Modulare ElektrifizierungsBaukasten or modular electric toolkit), Volkswagen has the intention to make the electric car a success story.

The first electric VW will hit the streets in the second part of 2019, after that there will be an avalanche of electric Volkswagens, all under the I.D. name, VW’s way to differentiate the electrified products.